European Central Bank Cuts Interest Rates to 0.5%

The European Central Bank (ECB) cut interest rates from 0.75 per cent to 0.5 per cent in May 2013 after weak economic data reported by the struggling Eurozone economies. The ECB action aims to provide a boost to its Eurozone members amidst growing fears over the Eurozone crisis and doubts over the Eurozone recovery. The ECB follows the US, UK, China and Japan who have all cut interest rates to record lows.

The possibility of rising inflation is increasingly likely given the environment of low interest rates and increase quantitative easing adopted by the major Western economies. However, the global recession and weak economic growth have scaled back the effects of inflation for the time being.